Unemployment rate fell further in August

Event

In August the seasonally adjusted unemployment rate fell to 20.6%—down by 0.3 percentage points on the month and 2.8 percentage points year on year.

Analysis

The August data provide a further indication that the labour market is continuing to recover, albeit from a still weak position. At 20.6% in August, Greece's jobless rate was comfortably the highest in the euro zone. In September (Greek monthly unemployment data are released with a lag compared with most of the rest of the EU) only Spain (16.7%) had an unemployment rate in any way comparable; no other country had a jobless rate higher than 11.1% (Italy). The average rate for the EU in September was 7.5%, and for the euro zone 8.9%.

Nevertheless, the latest data are encouraging. Greece's unemployment rate has been falling for some time, although this has relied mainly on a decline in the labour force, with many Greeks dropping out of the labour market, often to move abroad. However, in mid-2014 employment growth turned positive and has remained broadly so since. More recently it has strengthened further; in the five months to August monthly employment growth was consistently higher than 2% year on year—the first time that this has been the case over a five-month period since before the crisis.

The impact of the global financial and euro zone crises and of the conditions accompanying the subsequent bail-out programmes on the Greek labour market has been quite severe. In August the total number of people in the labour market was 5% lower than the average 2008 level (seasonally adjusted). The corresponding figure for employment was ‑16.6%. The total number of people registered as unemployed has more than doubled over the same period.

The outlook is moderately positive; the economy has returned to growth, underpinned in particular by strong tourist inflows, with positive spillovers for employment. This year looks set to post record tourist arrivals, and advance bookings suggest another strong year in 2018. However, more broadly we expect a continued debt overhang, and tight credit conditions will continue to hinder the recovery, limiting the positive impetus for the labour market.

Impact on the forecast

In the light of the latest data we are likely to revise down slightly our full-year estimate for the average unemployment rate of 21.6. We continue to expect a gradual decline in the jobless rate during the forecast period, but to a still high 16% in 2022.